Predicting the ‘long run’ is deceptive

Nouriel Roubini, one of the most famous and feared market observers these days, is an economics professor at New York University and a keen analyst of the stock market. Friday morning, he said that in the short term we would have a strong market, but in the “long run” the economy and the stock market would be catastrophic.

If you’re wondering what the “long run” means, you could do no better than looking back to the famous economist John Maynard Keynes.

I would guess that many of you know the comment that Keynes is known for. When asked what he meant by the “long run,” he said, ominously, “In the long run, we are all dead.” Hard to argue with that observation, isn’t it? Think about it: How often do you hear someone say, “Well, I think (the market, whatever) will be fine in the short run, but I’m worried about the long run.”

That’s a truism when predicting the outlook for so many items, from stocks to real estate to gold to almost any investment. A skeptic might say that if it’s that obvious, what good is it?

There are many adages about the market that most investors ignore. I’m probably repeating this one, but about six decades ago, my mother invested in the early days of a long bull market. One weekend, our neighbor, Mr. Blake – we always called older neighbors “Mr.” or “Mrs.” – beckoned me over and said, “I’ve got the secret of making money in the market for your mother: buy low and sell high. But don’t tell anyone else.”

I was really excited and ran back home to give my mother the “secret.” She was sitting at the kitchen table with one of my now late older brothers and I blurted out, “Mr. Blake just gave me the secret of making money in the stock market!” I was encouraged to divulge this secret and I said, “Well, it’s ‘buy low and sell high.’ ” I’m still embarrassed about how naïve I was. But if you think about it, if I can quote Shakespeare, “It’s a rule more honored in the breach than the observance.”

There are those who would say, just buy a good stock and put it away. In a way, that’s a truism. You wouldn’t know it’s a “good” stock until years have passed.

How about the “blue chips” like Chrysler, Woolworth, W.T. Grant and hundreds of others that went bankrupt or just barely survived? This is not to say that you shouldn’t listen to those with intelligence and experience, and right now Professor Roubini is probably at the top of the list of those worth listening to.

But then there’s the gold hustlers, whose commercials come very close to offering a guarantee of future profits. They point out that in the past 10 years, silver has outperformed the stock market by some 86 percent. There is no mention of the prior 10 years, when silver sat at just above a dollar while stocks were moving up.

Reading further into Professor Roubini’s forecast, his “short term” is two or three years. At my age, that’s definitely long term.